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Scrutinise borrowing in light of trust tax rise

Kiwi Mortgages principal adviser Rakesh Bansal says the recent Government move to increase the tax on trusts to 39% makes keeping investment property even more expensive.

Thursday, June 8th 2023, 8:09AM 2 Comments

by Sally Lindsay

“Investors need to regularly scrutinise their borrowing because of changing legislation and in terms of how much they can borrow and what tax vehicle will suit them from a tax efficiency point of view.

“The increase in trust tax will make many investors review their investment portfolios even though they cannot do anything about the rise.”

Bansal says the increase in trust tax combined with the phasing out of mortgage interest tax deductibility and changes to the Residential Tenancies Act, will make people think twice about property investing.

He says many first time investors are putting off entering the market – lending is tight because of higher interest rates, the weaker appetite of banks to lend and mortgage repayments rising.

“People have started calculating this in their own minds which I didn’t see a year ago,” Bansal says. 

“New investors always want to know what the repayments on an investment property mortgage are going to be to see if they fit into their household budgets, something I didn’t see previously.”

He says the mindset of the two property investor types – investing for retirement or building a portfolio – has changed and is quite different, Bansal says. 

“A couple in their 30s doing well will invest even if they have to initially make up a small loss. It is a temporary pain they can afford as they will take a long-term capital view in mind.

“The most important numbers for them are equity and whether their income is high enough to buy more properties.

“For people investing for retirement, they generally only want one property and to get the mortgage paid off as quickly as possible.” He says the important numbers of them are the rent and outgoings kept to a minimum to make the mortgage as easy as possible to manage.”

Tags: investment

« Medium density housing keeps rents lowerWeighing up objectives when it comes to investing »

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Comments from our readers

On 9 June 2023 at 12:27 am M Walker said:
“... increase in trust tax .......even though ..... cannot do anything about the rise.” Respectfully, this is not correct. "Proposed" tax increase, subject to change thru parliamentary process.
Submissions can be made now, 35 days left. Can submit through the following link:
https://www.parliament.nz/en/pb/sc/make-a-submission/document/53SCFE_SCF_42EBA6DA-C4F3-4432-208C-08DB57320DB1/taxation-annual-rates-for-2023-24-multinational-tax
On 17 June 2023 at 9:22 pm Rakesh Bansal said:
Thanks M Walker

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.69 7.49
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 7.09 6.89
ASB Bank 8.64 ▼7.39 7.05 6.85
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.35 7.05 6.85
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.95 7.65 7.45
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.10 - -
Co-operative Bank - Owner Occ 8.40 7.30 7.05 6.85
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.80 7.55 7.35
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.99 6.85 6.65
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 8.05 7.79
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 7.05 6.89
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.75 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 8.05 7.65 7.29
SBS Bank Special - 7.55 7.15 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.89 7.65
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 7.09 6.85
Unity 8.64 6.99 6.99 -
Wairarapa Building Society 8.60 7.15 6.94 -
Westpac 8.64 7.99 7.59 7.35
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.39 6.99 6.75
Median 8.64 7.45 7.40 6.87

Last updated: 7 December 2023 9:28am

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